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5.1

Surplus.

Generally, the lower the price of a

product, the more the consumers

will demand the product. That is,

high prices reduce demand and low

prices raise demand. So, generally,

p = D(x) is a decreasing function.

The Supply Curve p = S(x)

from the Producers Perspective.

Generally, the higher the price of a

product, the more the producers

are willing to supply. That is, high prices increase supply and low

prices decrease supply. So, generally, the supply curve is an

increasing function.

The Equilibrium Point ( xE , pE ) is the intersection of the supply

and demand curves.

Utility, U, is an economic idea. When a consumer receives x units

of a product a certain amount of pleasure, or utility, is derived from

it. For example, seeing four movies in a month gives you more

utility that seeing one movie.

Example A

The graph shown is the demand curve

for the number of movies Sam will see

in a month. The total benefit (utility;

measured in $) Sam receives for seeing

one movie in a month is the area under

the curve over the interval

[0, 1].

a.

Compute Sams utility for seeing

one movie per month.

b.

average expenditure for the month?

c.

What is the benefit Sam received for seeing the movie, but

did not pay for? This is called the consumer surplus.

d.

for seeing two movies per

month.

b.

when seeing two movies per

month is $7.50, what is Sams

average expenditure for the

month?

c.

What is the benefit Sam received, but did not pay for? This is

called the consumer surplus.

Consumer Surplus

The consumer surplus is the

total utility minus the total

expenditure. In general,

suppose that p = D(x) is the

demand function for a

commodity and D(Q) = P .

Then the consumer surplus is

defined for the point (Q, P )

as

Q

! D(x) dx " P #Q .

0

Example 1

Find the consumer surplus for the demand

function given by D(x) = (x ! 5)2 when x = 3.

Producer Surplus

Now lets look at the supply

curve for movies. At a price of

$0 per ticket, the supplier is

willing to supply 0 movies per

month. At a price of $5.75 per

ticket, the supplier is willing to

supply 1 movie per month.

a. What are the total receipts

the theater (producer)

receives for supplying

Sam with one movie per

month?

b. What does it cost the theater (producer) to show one movie per

month?

c.

Compute the total receipts minus the total cost? Explain its

meaning in this application.

producer surplus; it represents the [suppliers] surplus over its

cost; it is a contribution to profit. The producer surplus is the

total receipts minus the total cost. It is the benefit the producer

receives when supplying more units at a higher price, rather

than supplying fewer units at a lower price. Find the producer

surplus for supplying Sam with one movie per month for

$5.75?

e.

willing to supply two movies per

month at a ticket price of $7.50

each. What are the total receipts

for supplying Sam with two

movies per month?

f.

(producer) to show Sam two movies per month?

g. Find the producer surplus for supplying Sam with two movies

per month?

Producer Surplus

Now suppose the supply function is

p = S(x) and the theater shows Sam

Q movies when the price is P, that is

S(Q) = P . The producer surplus is

the total receipts minus the area

under the curve and is given by

Q

P !Q " # S(x) dx .

0

Example 2

when x = 3.

Equilibrium Point

The equilibrium point ( xE , pE ) is

where the supply and demand curves

intersect. This is that point where

sellers and buyers come together and

purchases and sales are actually

made. It is the point where consumer

and producer surpluses are defined.

Example 3

Given D(x) = (x ! 5)2 and

S(x) = x 2 + x + 3 , find each

of the following.

a. The equilibrium point.

5.2

Applications of

Recall:

P0 ekt dt and

"

P0 e! kt dt

dP

= kP is equivalent to P(t) = P0 ekt

dt

Example 1

Business: Growth in an Investment. Find the

balance in a savings account 3 years after $1000 is invested at 8%,

compounded continuously.

If the yearly flow of money into an investment is given by R(t) ,

then the future value of the continuous money flow at interest

rate k, compounded continuously, over T years is given by

"

R(t)! ekt dt

Example 2

Business: Future Value of a Continuous Money

Flow. Find the future value of a continuous money flow if $1000

per year flows at a constant rate into an account paying 8%,

compounded annually, for 15 years.

Example 3

Business: Continuous Money Flow. Consider the

continuous money flow into an investment at the constant rate of

P0 dollars per year. What should P0 be so that the amount of a

continuous flow over 20 years at an interest rate of 8%,

compounded continuously, will be $10,000?

Suppose that P(t) = P0 ekt is the annual

consumption of the resource in year t.

Since the consumption grows

exponentially at a growth rate of k, the

total consumption of the resource after T

years is given by

T

P0 kT

kt

P

e

dt

=

(e " 1) ,

!0 0

k

where P(0) = P0 .

Example 4

Physical Science: Gold Mining. In 2000 (t = 0)

world gold production was 2547 metric tons, and it was growing

exponentially at a rate of 0.6% per year. If the growth continues at

this rate, how many tons of gold will be produced from 2000 to

2013?

Example 5

Physical Science: Depletion of Worlds Gold

Reserves. In 2000 (t = 0) world gold reserves were estimated to be

77,000 metric tons. Assuming growth rate of production given in

example 4 continues and no new reserves are discovered, when

will the world reserves of gold be depleted?

Present Value

The present value, P0, of an amount P, when P0 is invested at

interest rate k, compounded continuously, and due t years later, is

given by

P0 = Pe! kt

Example 5

Business: Present Value. Find the present value of

$200,000 due 25 years from now, at 8.7% compounded

continuously.

The accumulated present value, A, of a continuous money flow

into an investment at a rate of R(t) dollars per year from now until

T years in the future is given by

A=

"

R(t) e! kt dt ,

Example 7

Business: Accumulated Present Value. Find the

accumulated present value of an investment over a 5-year period if

there is a continuous money flow of $2400 per year and the interest

rate is 14% compounded continuously.

5.3

Improper Integrals

Example A

Area Under a Curve. Find the area of the region

under the graph of y = 1 / x 2 over the interval [1, !] .

Example B

Area Under a Curve. Find the area of the region

under the graph of y = 1 / x over the interval [1, !] .

Improper Integral

An improper integral is one in which at least one of the limits of

integration is ! or ! " .

"

b#!

the integral is divergent.

Example 1

Evaluate Improper Integrals. Evaluate each

integral or state that it is divergent:

a.

b.

"

"

4e!2 x dx

ln x dx

Improper Integral

An improper integral is one in which at least one of the limits of

integration is ! or ! " .

1.

2.

3.

"

#

#

a

b

!"

"

!"

b#!

a$"

f (x) dx =

!"

"

f (x) dx + # f (x) dx

c

Example C

Evaluate Improper Integrals. Evaluate each

integral or state that it is divergent:

a.

b.

"

!"

!"

e2 x dx

xe! x dx

2

The accumulated present value, A, of a continuous money flow

into an investment of P dollars per year from now until T years in

the future is given by

P

1! e! kt ,

"0

k

where k is interest rate, compounded continuously. If the money

flow is to continue perpetually (forever), then take the limit at t

approaches infinity.

A=

Pe! kt dt =

Example D

Business: Accumulated Present Value.

a.

Find the accumulated present value of an investment over a

5-year period if there is a continuous money flow of $2400 per

year and the interest rate is 14% compounded continuously.

b.

Find the accumulated present value of an investment with a

perpetual money flow of $2400. Assume the interest rate is 14%

compounded continuously.

The accumulated present value, A, of a continuous money flow

into an investment of P dollars per year from now until T years in

the future is given by

T

P

A = " Pe! kt dt = 1! e! kt ,

0

k

where k is interest rate, compounded continuously. If the money

flow is to continue perpetually (forever), then take the limit at t

approaches infinity and

"

%P

( P

A = # Pe! kt dt = lim ' 1! e! kt * =

0

t$" & k

) k

P

A=

k

Example 2

Business: Accumulated Present Value. Find the

accumulated present value of an investment for which there is a

perpetual continuous money flow of $2000 per year. Assume the

interest is 8% compounded continuously.

5.6

Theorem 1

For a continuous function f denied on [a, b], the volume, V, of the

solid of revolution obtained by rotating about the x-axis the area

between the graph of f and [a, b] is given by

V=

"

! [ f (x)] dx

2

Example 1

Volume of a Solid of Revolution. Find the volume

of the solid of revolution generated by

rotating about the x-axis the region

under the graph of y = x from x = 0

to x = 1.

Example 2

Volume of a Solid of Revolution. Find the volume

of the solid of revolution generated by rotating about the x-axis the

region under the graph of y = e x from x = -1 to x = 2.

5.7

Differential Equations

Example A

Show that the differential equation, from Chapter 3,

dP

= kP , with P(0) = P0

dt

has the solution P(t) = P0 ekt .

Example 1

Solve y! = 3x

Example 2

Example 3

Verifying a Solution. Show that y = 4e x + 5e3x is

a solution of y!! " 4 y! + 3y = 0 .

Example B

Separation of Variables.

Solve

Example 4

Separation of Variables.

Solve 3y 2

where y = 5 when x = 0.

dy

= 2xy .

dx

dy

+ x = 0,

dx

dy x

=

dx y

Example 5

Separation of Variables.

Solve

Example 6

Separation of Variables.

Solve y! = x " xy

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